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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Let's broaden out here because in other news this morning,

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Speaker 2: Ford affirmed its full year operating guidance for twenty twenty four.

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Speaker 2: The motor giant still sees adjusted earnings of ten billion

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Speaker 2: to twelve billion dollars and adjusted free cash flow between

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Speaker 2: six to seven billion dollars. That is the same forecast

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Speaker 2: provided in early February. Now, for more on the company's

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Speaker 2: future and its plans for the EV market on please

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Speaker 2: to say. We're joined now by John Lawler. He is

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Speaker 2: Ford's chief financial officer. John, great to see.

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Speaker 1: You in person.

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Speaker 3: Nice to see you as well.

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Speaker 2: We have to start with the news of the morning,

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Speaker 2: and that is the situation that's unfolding in Baltimore right now.

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Speaker 2: That is after the collapse of the Key Bridge early

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Speaker 2: this morning, and of course that is the largest US

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Speaker 2: port for handling cars and light trucks. Now, my understanding

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Speaker 2: is that Ford makes most of its vehicles in North America,

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Speaker 2: but does Ford import any cars or components through the

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Speaker 2: port of Baltimore.

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Speaker 3: Well, first and foremost, our thoughts are with those impacted

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Speaker 3: in the city of Baltimore. It's too early to tell

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Speaker 3: at this point. Exactly what the impact will be on

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Speaker 3: the business. But through COVID, we've had experience in managing

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Speaker 3: supply chain disruptions and so we'll have to work that

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Speaker 3: and we'll find the best solution for those parts that

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Speaker 3: will be impacted.

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Speaker 1: Well, John, that was my next question.

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Speaker 2: And I know it's very very early and this is

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Speaker 2: a rapidly changing situation, but do you have any sense

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Speaker 2: about what impact this could have on this supply chain?

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Speaker 3: Well, of course, it's a large port with a lot

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Speaker 3: of flow through it, so it's going to have an impact.

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Speaker 3: It's just at this point we'll have to understand what

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Speaker 3: that means for us Specifically, we'll work on the workarounds.

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Speaker 3: We'll have to divert parts to other ports along the

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Speaker 3: East coast or elsewhere in the country, and it'll probably

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Speaker 3: lengthen the supply chain a bit. So we'll continue to

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Speaker 3: work that, and I would say that we have experience

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Speaker 3: now in understanding supply chain disruptions, and so we'll just

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Speaker 3: put that experience to work and figure out the best solution.

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Speaker 2: Well, I appreciate that color again on a very developing situation.

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Speaker 1: So let's switch gears here and talk about electric vehicles.

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Speaker 2: Obviously, I'm sure you spend most of your days talking

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Speaker 2: about EV demand. Specifically, it really hasn't grown to the

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Speaker 2: magnitude that many expected, of course, for it has dialed

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Speaker 2: back some of its EV investments. At what point might

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Speaker 2: Ford just revisit the EV strategy and your investment schedule.

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Speaker 3: Well, I think it's a matter of not if, but

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Speaker 3: when so evs are growing, and they're growing at a

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Speaker 3: quick rate, it's just not as fast as the industry

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Speaker 3: had anticipated. So we're adjusting appropriately to that. We're adjusting

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Speaker 3: our capacity to meet that demand. We've seen significant price reductions,

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Speaker 3: so we're working on our business fundamentals to.

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Speaker 1: Improve those as well.

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Speaker 3: But I think the important thing is evs are coming

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Speaker 3: and they will be part of the transition. The other

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Speaker 3: thing that I think is very important for consumers is

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Speaker 3: to understand that hybrids and plug in hybrids are also

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Speaker 3: a solution that we offer. So we see ourselves as

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Speaker 3: the company of choice. We offer gas vehicles, diesel vehicles, hybrids,

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Speaker 3: plug in hybrids, and pure evs, and as a first

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Speaker 3: mover in the market, we think we have a pretty

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Speaker 3: good read on where it's headed and we're adjusting appropriately.

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Speaker 2: I definitely want to get to hybrids because I see

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Speaker 2: a lot more of them on the road, and it

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Speaker 2: seems like a lot of people are going to that alternative.

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Speaker 1: But let's talk about cost here.

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Speaker 2: I mean, anecdotally, it feels like most people say EV's

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Speaker 2: cost more. You know, we're in a high inflationary period

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Speaker 2: right now. How are you responding to that? Of course,

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Speaker 2: Bloomberg has reported that you're developing a twenty five thousand

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Speaker 2: dollars compact EV.

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Speaker 1: Can you share more about that?

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Speaker 3: Well, about two years ago now, we realized that the

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Speaker 3: market where the sweet spot in the market should be

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Speaker 3: is in a lower cost EV and so we started

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Speaker 3: what we call our Skunk Quirks Group, which is a

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Speaker 3: group of really highly qualified EV designers and engineers. We

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Speaker 3: have them out in California and they're designing a low

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Speaker 3: cost platform for us so that we can hit what

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Speaker 3: we see as the key market, consumer market for evs.

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Speaker 3: And that is going to be an approach of having

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Speaker 3: an affordable, low cost solution for consumers. And so I

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Speaker 3: think as vehicles like that come into market, you'll start

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Speaker 3: to see that demand increase and then the scaling of

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Speaker 3: the evs increase across the industry.

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Speaker 2: Well, we're talking about EVS demand in the context of

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Speaker 2: that consumer market, but let's talk about the commercial market

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Speaker 2: for example.

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Speaker 1: Because it feels like this drop off an EV demand or.

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Speaker 2: Less growth than expected has really been specific to the

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Speaker 2: consumer market. Why do you think that there's more resilience

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Speaker 2: and more sustainable demand when it comes to commercial vehicles.

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Speaker 3: When you look at commercial customers, one, they need it

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Speaker 3: for their entire fleet compliance. But number two is they

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Speaker 3: have the ability to really understand the total cost ownership

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Speaker 3: for those evs and for part of their duty cycle

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Speaker 3: it is a lower cost solution, and they've been taking

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Speaker 3: a much more thoughtful approach. They've been buying small numbers

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Speaker 3: of vehicles, testing them out in their fleet, understanding that

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Speaker 3: cost of ownership, understanding where they can save money and

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Speaker 3: where it is a better cost solution for their fleet,

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Speaker 3: and then they're moving forward. So we're starting to see

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Speaker 3: more traction in the commercial space, and especially with our

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Speaker 3: transit electric van.

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Speaker 2: I'm also curious about how the charging infrastructure differs for

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Speaker 2: commercial vehicles versus passenger vehicles for example. I mean, when

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Speaker 2: you think about buses in a city, for example, they

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Speaker 2: all sleep in the same place and you can just

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Speaker 2: have a charger there, But I'm curious about how you're

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Speaker 2: thinking about that.

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Speaker 3: So that's one of the key things with our Ford

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Speaker 3: Pro business, our commercial vehicle business, we offer charging solutions,

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Speaker 3: not only the hardware and setting up the charging in

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Speaker 3: their depots, but also the software to manage the fleet

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Speaker 3: as well in the charging. So it's a real opportunity

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Speaker 3: for us to provide an end to end solution the vehicle,

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Speaker 3: the software, the charging solutions for our marcial customers.

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Speaker 2: Well, we have to talk about the competitive landscape here

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Speaker 2: on a global scale because actually one of Ford's top

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Speaker 2: EV executives recently described Chinese EV's as quote, a colossal

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Speaker 2: strategic threat.

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Speaker 1: How are you combating that? What is Ford's plan here?

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Speaker 3: Will make no mistake, it is a significant threat. So

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Speaker 3: it's affordability. They have a low cost structure. That's where

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Speaker 3: our small EV comes in as well as that Skunk

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Speaker 3: groups groups that Skunk group that is working on that

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Speaker 3: low cost, very advanced architecture for evs where we think

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Speaker 3: we will be able to compete with the Chinese and

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Speaker 3: other low cost manufacturers.

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Speaker 2: Well, it's going to be definitely interesting to follow the

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Speaker 2: developments there. But let's get back to hybrid's I'm super

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Speaker 2: interested in this space and it was interesting. Actually, you

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Speaker 2: had Morgan Stanley's Adam Jonas out with a note this

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Speaker 2: months that he sees the quote hybrid renaissance is really

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Speaker 2: a direct competitor for the incremental EV buyer. Do you

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Speaker 2: see that within your own lineup? Do you see hybrids

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Speaker 2: taking share from evs?

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Speaker 3: We see hybrids as a duty cycle alternative for customers

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Speaker 3: electric vehicles. Duty cycle doesn't work for some and those

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Speaker 3: that don't want just pure gas vehicles or diesel vehicles,

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Speaker 3: so they can go for a hybrid. That's why we've

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Speaker 3: continued to invest in hybrids. We continue to offer hybrids

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Speaker 3: so you can see it as a bridge to full

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Speaker 3: electric and we think it's something that consumers are really

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Speaker 3: leaning into because of all of those factors I cited.

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Speaker 1: Do you have plans to roll out more hybrids.

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Speaker 3: Yes, we do. Well, we're launching a new Escape, We've

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Speaker 3: just launched a new Escape hybrid. We're launching a Couga

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Speaker 3: hybrid in Europe. And so we have the number one

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Speaker 3: selling truck hybrid and the Maverick and the number two

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Speaker 3: selling truck hybrid in the Ford F one fifty, so

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Speaker 3: we're number three in the US and hybrids, and we

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Speaker 3: continue to plan on offering more solutions to our customers.

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Speaker 1: All right, there you go.

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Speaker 2: I do also want to talk about the relationship with

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Speaker 2: the UAW. You did have the Ford CEO, Jim Farley.

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Speaker 2: He said that the company's one strong relationship with the

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Speaker 2: UAW was hurt by the strike, and with that in mind,

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Speaker 2: what is for doing to repair that relationship.

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Speaker 3: Well, I think it's just about understanding that both of

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Speaker 3: us has similar goals and that is making Ford Motor

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Speaker 3: Company as strongly as we can be providing the most

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Speaker 3: jobs that we can provide in producing cars and SUVs,

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Speaker 3: et cetera for our customers. So we're working with them,

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Speaker 3: collaborating with them, and you know, time over time things

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Speaker 3: will improve, and you know we're already seeing that. So

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Speaker 3: they've been strong partners of ours and we're going to

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Speaker 3: continue to work with them. It's in the best interest

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Speaker 3: for both parties.

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Speaker 2: So an ongoing conversation and ongoing relationship there, and I'm

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Speaker 2: very aware of that. I'm talking about to the chief

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Speaker 2: financial officer. So I do want to talk about your

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Speaker 2: recent return to investment creative course that credit rating layer

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Speaker 2: that on top of higher labor costs and those deeper

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Speaker 2: EV losses. How are you protect protecting that IG rating?

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Speaker 3: Well, when you look at our business, we have three

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Speaker 3: or four very strong businesses. We have Blue which is

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Speaker 3: our gas and diesel business, We have the EV business,

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Speaker 3: and we have Ford Pro which is our commercial business,

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Speaker 3: and of course Ford Credit the bank both Blue, Ford

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Speaker 3: Blue and Ford Pro great profitability, growing business, strong cash flows.

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Speaker 3: Now he is experience and losses right now, but we

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Speaker 3: know that we need to bring that business to stand

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Speaker 3: on its own and to be profitable, and we're working

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Speaker 3: towards that. And then of course a competitive advantage for

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Speaker 3: us is the bank where we finance our consumers and

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Speaker 3: we have incredible customer loyalty there.

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Speaker 2: All right, John, that's a good place to leave it.

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Speaker 2: Really appreciate your time this morning.

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Speaker 1: Of course.

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Speaker 2: That is John Lawler. He is the chief financial officer

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Speaker 2: of Ford